Rebuilding New York's Economy: Casinos on the horizon?

Oct. 8, 2013

Written by

Albany Bureau Chief

Here’s the language for Proposition #1 at the ballot box Nov. 5 “The proposed amendment to section 9 of article 1 of the Constitution would allow the Legislature to authorize up to seven casinos in New York State for the legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated. Shall the amendment be approved?” Here’s the details about the state’s Upstate NY Gaming Economic Development Act:-- In order for the act to move forward, voters have to change the state constitution to legalize private casinos. The vote is Nov. 5 as part of the general election. -- Under the agreement between Gov. Andrew Cuomo and the Legislature, a new law would authorize four upstate “destination gaming resorts” in three regions: Hudson Valley–Catskill area, the Capital District-Saratoga area and the Central-Southern Tier. One region may have up to two casinos. -- A state siting board would pick the developers and locations. No casinos would be authorized in Westchester, Rockland, Putnam, New York City or Long Island for seven years. Nor would they be in western, central or northern New York where tribal agreements exist. -- The tax rate on slot machines would be equal to the tax rate of existing video lottery gaming facilities within each region, which currently ranges from 37 percent to 45 percent. The tax rate on table games would be 10 percent. -- Ten percent of the state’s tax revenue would be split equally between the host municipality and the host county. Another 10 percent would go to local tax relief; the rest would go to the state’s education system. -- A $500 annual fee on each slot machine and table game would go to fund problem gambling -- Two video-lottery terminal facility would be built on Long Island. If the referendum fails, up to four video lottery gaming facilities could be located in the Capital Region, Southern Tier and Catskills. About this seriesThis is the ninth installment in a yearlong Albany bureau series, “Rebuilding New York’s Economy,” looking at key factors affecting the state’s economic recovery and whether it is succeeding. Previous installments looked at New York’s indecision on hydraulic fracturing, Gov. Andrew Cuomo’s upstate focus and whether New York is undergoing a farm boom. Click here to read the series and view videos and photosNEXT: Upcoming installments will look at whether the state’s regional economic development councils are succeeding and whether film-tax credits are helping create jobs.

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ALBANY — New York has nine racinos, including the two largest in the world in Yonkers and Queens. The state has also five Indian casinos and the biggest lottery in the nation.

New York’s gambling options may grow even more – if voters approve.

A referendum on the ballot Nov. 5 would authorize up to seven private casinos in New York, with the first four to be built upstate in the Southern Tier, Albany area and the Catskills.

It would be the largest gambling expansion in the state since 2001, when the state approved video-lottery terminals at racetracks and the Indian casinos in the wake of the 9/11 attacks.

Gov. Andrew Cuomo has touted the proposal as a way to boost the upstate economy, saying the casinos could drive some of the 50 million annual visitors to New York City to come upstate. A series this year by Gannett’s Albany Bureau titled “Rebuilding New York’s Economy” has detailed the struggles of upstate as manufacturing jobs decline and the population drops.

“The governor supports this initiative because it will add thousands of good paying jobs, generate millions of dollars for education, provide property tax relief for middle-class families and create world-class resorts for tourism in Upstate New York,” said spokesman Richard Azzopardi.

The casino proposition itself reads like a tourism brochure.

It says the casinos would approved for the “legislated purposes of promoting job growth, increasing aid to schools, and permitting local governments to lower property taxes through revenues generated. Shall the amendment be approved?”

The language has drawn criticism from conservative groups, saying it paints too rosy a picture of gambling.

“Casino gambling will produce new problems as evidenced in the areas where casinos are currently located,” the state Conservative Party said in a statement. “In 1966, the Legislature told New York citizens, if they approved the lottery, their school taxes would be reduced. Every year school taxes go up.”

Room for growth?

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Gambling experts are skeptical of the promise that more casinos in New York would bring new prosperity, even as investors appear ready to jump in if the referendum is approved.

The Northeast casino market is already nearly saturated. There are 55 casinos in the Northeast, including 12 in Atlantic City and 11 in Pennsylvania. Three are planned for Massachusetts, while Connecticut has the massive Foxwoods and Mohegan Sun casinos and is considering three new gaming halls.

Adding more casinos in New York may lure patrons, but it could come at the expense of existing gambling halls in the state, said Clyde Barrow, a gambling expert at the University of Massachusetts Dartmouth.

“Eventually all it’s going to do is attract either visitors who are already going there or it’s going to cannibalize existing facilities, particularly Empire Raceway (in Yonkers) and Aqueduct (in Queens),” Barrow said.

A report Sept. 19 by Moody’s Investment Services warned states to not rely heavily on gambling growth. It pointed out how casino revenue in Atlantic City has dropped 44 percent since 2006.

Cuomo, though, has indicated that there is room for growth and the opportunity for thousands of new jobs. He’s reached deals in recent months with the three tribes that run Indian casinos and the racetracks to quell major opposition to the referendum.

So far it’s worked. There has been no big-money opposition from casinos in neighboring states or from Las Vegas.

Cuomo, though, hasn’t campaigned actively for the proposal nor has indicated that he’ll try to use his political capital to get a yes vote. He predicted it will pass, but it will require educating voters.

"I think that's going to be the natural knee jerk for people" to reject more gambling, Cuomo said Sept. 23. "You have to say, 'Hold on a second. It's not really gambling versus no gambling. I know we have to change the constitution, but we already have gambling. We just don't call it gambling.' I think it passes, but it's a sophisticated argument, no doubt."

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The vote comes in a local election year when turnout will be low. The largest turnout will likely be in New York City for its mayor’s race, and it’s unclear whether city residents will vote for the proposition.

Also, the proposition may be hard to find at the polls. While it’s the first of six propositions on the ballot, it may appear on the backs of paper ballots in some counties.

Sen. John Bonacic, R-Mount Hope, Orange County, said he hopes Cuomo takes a more active role as the referendum nears. Bonacic is pushing for two casinos in the Catskills, which was once a prime resort area for New York City denizens.

“Maybe with the governor, and I’m not questioning his wisdom, it’s a timing issue,” Bonacic said. “He may not want to peak too early. He may be holding his powder.”

Building support

Business groups, pro-casino developers and unions are working together on what likely will be a limited advertising push closer to the referendum.

“Right now, it doesn’t appear that there is any organized oppositions and assuming that’s the case, I think it’s something that the voters have to decide,” said Jeff Gural, owner of Tioga Downs in the Southern Tier.

Gural is leading an upstate coalition that will lobby for the referendum, and it met recently in his Manhattan offices. He said they plan to poll the issue and then decide on a media strategy. He said there’s no immediate price tag on the campaign.

Several groups have recently opened campaign committees, such as the Tioga Downs Proposition #1 Committee and Citizens for NYS Gaming.

“Maybe we would do something toward the end, just to remind people about the issue and asking them to come out and vote,” Gural said.

Tioga Downs appears to be the leading candidate to land a Southern Tier casino because it already has the video-lottery facility. Gural has vowed to add a convention center, a parking garage and other amenities if he wins one of the gaming contracts.

“I plan to start the next day on construction” if the referendum is approved, he said.

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Three developers are eying casinos in the Catskills. Empire Resorts wants to move Monticello Raceway to the old Concord Hotel in Sullivan County, and Foxwoods wants to build nearby at the former Grossinger’s Hotel.

In Ulster County, developers want to put a casino at the former Nevele resort in Ellenville.

Michael Treanor, whose company wants to build at the Nevele, said New York can accommodate more casinos, pointing how the Catskills are only 90 miles from New York City and its 8 million people.

“It doesn’t take a whole lot of people deciding to drive or get on a bus to go up to Ellenville to have a lot of people up there,” Treanor said. “The New York metropolitan area is actually largely untapped.”

Deal details

Cuomo has fended off opposition to the referendum in part by forcing the first four casinos upstate. They will have exclusivity for seven years before the three others could be built, likely in the New York City area.

If Cuomo had included a New York City casino in the first round, big players in the casino industry would have probably try to squash the referendum, some officials said.

Cuomo has said the upstate casinos would bring jobs to struggling regions and also promote tourism upstate. The Catskills and Southern Tier have among the highest unemployment rates in the state.

A casino in the Albany area, likely in Saratoga because it has a video-lottery parlor, would compete with one proposed for western Massachusetts.

“For too many years, gaming revenue has left New York for our neighboring states,” Cuomo said July 30, when he signed the casino law.

New York law requires a constitutional change to allow for casino gambling; changes to the constitution need voter approval. The Legislature and Cuomo backed enacting legislation that puts the first four casinos upstate.

The agreement also gives three Indian tribes gaming exclusivity in the regions where they already have casinos: the Senecas in western New York, the Oneidas in central New York and the Mohawks in northern New York.

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The move led the tribes to support the referendum. Cuomo also reached agreement with the nine racetracks to give them parity if a private casino was built nearby. There is also a poison pill: If the referendum fails, Cuomo could put more video-lottery terminal facilities in the Capital Region, Southern Tier and Catskills.

Some of the tracks, though, have offered only limited support. While the owners of racinos in Saratoga, Monticello and Tioga want to build casinos, the other tracks are limited by the referendum.

Yonkers and Aqueduct can’t turn their racinos into casinos for at least seven years. Batavia Downs, Finger Lakes and Buffalo Raceway can’t become casinos because they are located in the Senecas’ territory, while Vernon Downs in central New York is located in the Oneidas’ territory.

Yonkers Raceway said it supports the referendum. Yonkers has 5,300 video-lottery terminals, the most in the state, followed by about 5,000 at Aqueduct.

“While we support the initiative to create up to seven commercial casino licenses in New York, and look forward to securing one of those licenses in the future, we are closely monitoring the process to determine the proximity and impact the new casinos will have to our business,” said spokeswoman Taryn Duffy.